Refer to Important disclosures in the last page of this report

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Refer to Important disclosures in the last page of this report

Stock Data

Target price (Rp) Rp1,750

Prior TP (Rp) Rp1,600

Shareprice (Rp) Rp1,530

Upside/downside (%) +14.4

Sharesoutstanding (m) 3,561

Marketcap. (US$ m) 379

Government of Indonesia 51.0%

Public 49.0%

Estimate Change; Vs. Consensus

2018 2019

PT Indo Premier Sekuritas joey.faustian@ipc.co.id +62 21 5793 1168

Slight delay in LRT development

Maintain FY18F new contract guidance amid weak 10M18 realization.

Expecting LRT’s 2

nd

payment in mid December of Rp2.84tn.

Cut our earnings forecast by 14/7% for FY18F/FY19F.

Capex plan of Rp12tn to develop TODs in the next 10 years.

Maintain Buy amid higher TP of Rp1750 (from Rp1,600).

We keep our new contract assumption unchaged.

Despite weak new contract

of Rp12.3tn in 10M18 (+3% yoy), forming only 54% of company’s FY18Y new

contract guidance of Rp23.4tn (Ours: Rp21tn), we still believe that ADHI will fulfill

its FY18F target given several project tenders in their pipeline worth Rp23tn.

Some of the notable projects were Sigli-Banda Aceh toll road, Jakarta inner toll

road and renovation of Soekarno-Hatta airport which worth total of Rp12.7tn.

To received LRT’s 2

nd

payment in mid December.

ADHI is expected to receive

LRT 2

nd

payment (Construction work: Sept 2017-Juni 2018) in the 2

nd

week of

December worth of Rp2.84tn (After PPN) as the payment’s document has already

signed by Ministry of Transportation. As of mid 10M18, the construction progress

of LRT Jabodebek has reached 49%, thus we forecast FY19F revenue to grow by

15% yoy supported by the remaining of LRT contract which will be monetized in

FY19F.

Cut our earnings forecast given LRT project delay.

Due to land acquisition

problem for LRT depot in West Bekasi (5.2ha) and Cikunir, ADHI has experienced

some delays in LRT’s construction, which prompt them to revise down their

revenue guidance for FY18F to Rp16.6tn (from Rp18.5tn). Thus, we cut our

FY18F/FY19F earnings by 14%/7%, given the delays on LRT construction

progress.

TOD as a long-term growth strategy.

ADHI currently has 20ha of landbank to

develop more than 15,000 apartments. ADHI is currently discussing a partnership

possibility with Bakrie Group as a land owner to develop TODs in Pasar Festival

and Setiabudi. In the long term, ADHI plans to acquire additional 50ha landbank

and prepares Capex of Rp12tn to develop more TODs in the next 10 years. The

TOD division would be developed under Adhi Commuter Properti (ACP) which is

expected launch into IPO in mid 2019.

Maintain Buy with higher TP of Rp1,750.

Despite lower earnings estimate, our

new target price (DCF-based, WACC: 10.4%, TG: 2%) was raised to Rp1,750

(from Rp1,600) as we roll over base valuation year to 2019 and lower risk free

rate assumption to 8% (from 8.5%). We maintain our Buy rating for ADHI with

14% upside to our new target price which implies FY18-FY19F P/E of 6.8x and

5.6x, respectively. Key risk to our call might come from LRT project delays.

Adhi Karya

(

ADHI IJ

)

Source: ADHI, IndoPremier Share Price Closing as of : 29-November-2018

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2 Refer to Important disclosures in the last page of this report

Fig. 1: Revenue by segment Fig. 2: Earnings trend

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 3: New contract trend Fig. 4: 10M18 new contract achievements

Fig. 5: LRT Jabodebek phase I progress Fig. 6: Margin improved due to EPC and Property segment

-2014A 2015A 2016A 2017A 2018F 2019F

Investment in infrastructure Real estates EPC Construction

(Rp bn)

2014A 2015A 2016A 2017A 2018F 2019F

Net profit growth

(Rp bn)

2014A 2015A 2016A 2017A 2018F 2019F 2020F

(Rp bn) New Contract LRT

70%

(Rp bn) 10M18 New contract % of FY target (Non LRT)

71%

Cawang-Cibubur Cawang-Dukuh Atas Cawang-East Bekasi LRT Progress as of Mid 11M18

0.0%

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3 Refer to Important disclosures in the last page of this report

Fig. 8: Earnings change

(Old) (New) (%) change

(Rp bn) 2018F 2019F 2018F 2019F 2018F 2019F

Revenue 18,225.5 19,793.1 16,598.7 19,097.5 -8.9% -3.5%

Gross profit 2,684.9 2,892.7 2,457.2 2,747.1 -8.5% -5.0%

Operating profit 2,039.2 2,307.1 1,863.1 2,178.4 -8.6% -5.6%

Net income 776.0 987.1 670.5 920.1 -13.6% -6.8%

Margins

Gross margin 14.7% 14.6% 14.8% 14.4%

Operating margin 11.2% 11.7% 11.2% 11.4%

Net margin 4.3% 5.0% 4.0% 4.8%

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4 Refer to Important disclosures in the last page of this report

Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F

Income Statement

Net Revenue 11,064 15,156 16,599 19,098 22,507

Cost of Sales (9,949) (13,098) (14,142) (16,350) (19,290)

Gross Profit 1,115 2,058 2,457 2,747 3,216

SG&A Expenses (456) (581) (727) (756) (899)

Operating Profit 659 1,477 1,730 1,991 2,317

Net Interest (95) (341) (422) (402) (481)

Forex Gain (Loss) 64 7 0 0 0

Others-Net (15) (185) (150) (108) (61)

Pre-Tax Income 613 957 1,158 1,481 1,776

Income Tax (298) (440) (486) (558) (651)

Minorities (2) (2) (2) (3) (3)

Net Income 313 515 671 920 1,122

Balance Sheet

Cash & Equivalent 3,365 4,131 5,548 4,217 4,173

Receivable 3,970 3,739 3,755 4,328 5,047

Inventory 131 3,683 3,236 3,588 4,021

Other Current Assets 9,368 13,264 13,597 16,026 18,572

Total Current Assets 16,835 24,818 26,137 28,160 31,814

Fixed Assets - Net 1,814 1,876 3,677 4,850 5,434

Goodwill 0 0 0 0 0

Non Current Assets 1,446 1,639 1,657 1,821 2,009

Total Assets 20,095 28,333 31,471 34,831 39,257

ST Loans 2,344 3,537 4,565 5,252 6,189

Payable 8,373 11,611 0 13,017 15,404

Other Payables 1,828 2,235 2,255 2,561 3,075

Current Portion of LT Loans 500 250 250 500 0

Total Current Liab. 13,044 17,633 18,376 21,329 24,669

Long Term Loans 1,428 4,665 6,513 6,166 6,374

Other LT Liab. 180 164 195 229 261

Total Liabilities 14,653 22,463 25,084 27,724 31,303

Equity 3,415 3,413 3,413 3,413 3,413

Retained Earnings 1,997 2,446 2,947 3,666 4,511

Minority Interest 10 11 12 13 14

Total SHE + Minority Int. 5,422 5,869 6,371 7,091 7,938

Total Liabilities & Equity 20,075 28,332 31,456 34,816 39,241

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5 Refer to Important disclosures in the last page of this report

Year to 31 Dec 2016A 2017A 2018F 2019F 2020F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 315 517 673 923 1,125

Depr. & Amortization 66 131 208 332 421

Changes in Working Capital 2,074 191 (8) 779 1,306

Others (301) (3,124) (3,360) 132 (1,583)

Cash Flow From Operating 2,154 (2,285) (2,487) 2,166 1,269

Capital Expenditure (1,257) (386) (2,028) (1,669) (1,193)

Others 163 104 145 194 148

Cash Flow From Investing (1,094) (283) (1,883) (1,474) (1,045)

Loans 1,153 4,181 2,875 590 646

Equity 1 0 0 0 0

Dividends (94) (94) (155) (201) (276)

Others (195) (447) (546) (569) (609)

Cash Flow From Financing 866 3,640 2,175 (180) (239)

Changes in Cash 1,926 1,072 (2,195) 511 (16)

Financial Ratios

Gross Margin (%) 10.1 13.6 14.8 14.4 14.3

Operating Margin (%) 6.0 9.7 10.4 10.4 10.3

Pre-Tax Margin (%) 5.5 6.3 7.0 7.8 7.9

Net Margin (%) 2.8 3.4 4.0 4.8 5.0

ROA (%) 1.7 2.1 2.2 2.8 3.0

ROE (%) 5.9 9.1 11.0 13.7 14.9

ROIC (%) 5.2 5.2 5.1 6.1 6.4

Acct. Receivables TO (days) 84.8 70.2 64.1 59.8 58.5

Acct. Receivables - Other TO (days) 35.4 22.6 18.3 17.5 17.5

Inventory TO (days) 67.8 6.9 4.1 4.8 5.1

Payable TO (days) 272.6 278.4 295.8 271.5 268.9

Acct. Payables - Other TO (days) 0.0 0.0 0.0 0.0 0.0

Debt to Equity (%) 78.8 144.0 177.8 168.1 158.3

Interest Coverage Ratio (x) 0.4 0.3 0.3 0.3 0.3

Net Gearing (%) 16.7 73.6 90.7 108.6 105.7

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Head Office

PT INDO PREMIER SEKURITAS

Wisma GKBI 7/F Suite 718

Jl. Jend. Sudirman No.28

Jakarta 10210 - Indonesia

p +62.21.5793.1168

f +62.21.5793.1167

INVESTMENT RATINGS

BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.

The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

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